What are Taxes Like in Panama?
As property buyers consider their international options, taxes play a key and often little-discussed role. Not only do personal and property taxes affect long-term profits and affordability, but the tax system also provides valuable evidence about a country’s stability and economic strength.
How does Panama rank? We already know that property taxes are among the lowest in the region, typically between 0.5% to 0.7% of the value of the property. Our team keeps clients well apprised of the tax advantages available for properties of different types.
But how does Panama’s tax system compare to other countries?
The Florida International University’s Adam Smith Center for Economic Freedom helps provide some answers and context. The center’s Comprehensive Tax Index is a comprehensive look at the tax regimes in the region, ranking 18 Latin American countries across more than 40 variables.
The data makes it clear: Panama leads the region in developing tax structures that aid businesses and individuals.
The center’s study focused on five areas: Corporate taxes, individual taxes, consumption taxes, property taxes, and international taxes
Based on the combined results, Panama has “the most competitive tax system in the region,” the center concluded. Panama’s score was aided by “the lowest VAT and capital gains tax rates in Latin America.” (“Tax competitiveness” is defined as “the ability of a fiscal system to minimize the tax burdens faced by both individuals and businesses, allowing for low marginal rates that encourage capital inflows and foster economic activity.”
Panama ranked near the top in individual taxes. Eliminate outlier El Salvador, and Panama is one of the most favorable countries in the region for property taxes, according to the study.
The study also found that Panama is the country that “most encourages foreign investment in Latin America.” It has no rules on foreign-controlled companies or restrictions on interest deductions. And, except for a stamp duty on real estate transfers, Panama does not impose taxes on wealth, inheritances, donations, assets, or capital. Panama has the least stringent international tax regulations, making it the best-performing country in this component.
It’s also worth noting that Panama continues to improve. After posting a 62.49 score in 2021, Panama’s total improved to 65.38, a 4.62% improvement.
